00:00:00
I gotta wrap, guys. I got to catch a flight to Miami. Let me do a closing here. If you want to keep going, you're
00:00:04
welcome. Two. Three. Two. The plane. Just wait. Just text the pilot and just tell them you're all right. Listen. I'm
00:00:09
not burning all the allin credits, so to speak, and all of our tokens. I'm kidding. I'm kidding. I'm kidding. I'm
00:00:16
not flying private to everything and then putting it on the all-in budget. The rest of us are flying Southwest
00:00:23
for your dictator Jim Pol. It's a strange concept. Yeah. David S. I What does that
00:00:30
mean, Dave? When's the last time you flew a commercial? Clinton, I haven't missed a flight in about 15 years.
00:00:37
[Music] Let your winners ride. [Music] We open sourced it to the fans and they've just gone crazy with it.
00:00:54
All right, everybody. Welcome back to the number one podcast in the world. We're back. We're back and what an
00:01:00
amazing panel we have today with us. Ryan Peterson, friend of the pod, is back on the show. He's the CEO of
00:01:07
Flexport. How are you doing, Ryan? Did you get any skiing in this year? I know you like to ski in the deep powder like
00:01:13
I tried, man, but it was a busy year for work and I got two little kids. I I did
00:01:18
a few days. Okay. So, you're Oh, yes. We all forgot you gave control of your company to somebody. It got a little uh
00:01:26
shaky, got a little contentious, and then you took the reigns back. How's it been being back in the pilot seat? Oh,
00:01:33
that was a year and a half ago. So, it's a distant memory for in in flexport time. That's like a decade. We've uh
00:01:39
yeah, really had an amazing run. Although, these tariffs, I mean, I guess that's why you guys invited me on. These
00:01:44
tariffs have kind of made a lot of created a lot of new uncertainty in the flex sports world. Okay, so we'll
00:01:49
definitely get into that. and of course fan favorite back for his fourth appearance on the pod. I I I was so
00:01:56
first of all I saw the comment I I saw the comments last time I was on. I'm I'm officially not a fan favorite but uh
00:02:01
glad to be back on and I will be I will be representing free markets uh in uh in
00:02:06
this uh uh in this version. What do the comments say about you? It was like uh you know like uh loves Biden uh you know
00:02:16
to totally beta you know all the uh lover beat soy boy you're filling in for me though. Um I think so. Yes. I was
00:02:25
trying to represent uh I was trying to represent libertarian values at the time. But uh but I love this that the
00:02:30
leftists are embracing Milton Freeman. I think it's all worth it if that's what comes out of all of AOC AOC is going to
00:02:37
be a complete free market uh person soon. Yeah, free market months are coming soon. Embracing free market
00:02:42
values and the stock market, right? Yes. Exactly. Because any decline in the stock market is Trump's fault. So now
00:02:48
they're they're embracing the stock market. Well, unfortunately unfortunately the one day that he said
00:02:52
it's Biden's market, it was a it was a green day. So that uh that didn't help the case. I mean gosh uh well listen,
00:02:57
it's another massive green day already. All that matters to me is that Uber is the anti-tariff stock. It just does
00:03:07
great. It's not impacted by tariffs. So here we go. with Chimoth. It started already. We have TDS on both sides.
00:03:12
We've got Trump derangement syndrome from Aaron. Wait, no, no, no, no. I want to be defender syndrome from Sachs.
00:03:18
We've got both. Defender and derangement. Here we go. Syndrome. Trump bias syndrome on your part. Who? Me? Me?
00:03:25
I call balls and strikes. What are you talking about? Let's get started. It's starting already, folks. It's going to
00:03:31
be a great episode. Lots of excitement with us again. Jason has the uh the rain self-sabotage. Find every way to not get
00:03:39
rich syndrome. I do. What are you talking about? You guys said you're buy me out of this thing and I can get the
00:03:45
hell out of here. You know how much my shares are in all in worth? For the love of God, write a check.
00:03:52
Get me the hell out of here. I just may. Oh god. I mean, I'm going to be a terror. If Uber breaks 88, that's my
00:04:00
number. 88 is the number. You're all when that happens. Uh, and we're getting close. All right, let's get started
00:04:07
here. We have so many topics to get through with us again. David Saxs. Hey David, you're doing uh more episodes
00:04:15
now. The audience wants to know. I don't know if we're allowed to make any initial announcements, but people are
00:04:20
asking me on the streets, in the airports, in the comment threads. Is Sachs back?
00:04:26
Well, the ratings are back ever since I came back to the show. That's for sure. The ratings are back, show, but is
00:04:34
measurable back? Is Sachs back? Well, I'm back as much as I can. Mhm. And you are a partial employee of the
00:04:42
government. You can do 130 days a year or something. Is that still the status? Yeah, it's roughly half after work days.
00:04:48
Got it. And so what do you do? You have a you have a punch clock there. When you
00:04:51
get to the White House, you punch in, you punch out like Fred Flintstone or what? Are you keeping track of these
00:04:55
days? How do you do it? I know why you don't know this because you have yet to be invited to the White House. But
00:04:59
that's interesting. I got not how it works. Normal people just people just badge in and badge out like that. Badge
00:05:06
it and badge. It's a natural place, Jason. I I mean, literally, it's interesting. There's a new private club.
00:05:11
It's incredible that you have thoroughly prepared for this week, just like always. I am always prepared.
00:05:17
Interestingly, I don't know if you gentlemen know this, Ryan and Aaron. There's a new private club in DC that uh
00:05:23
Don Jr. is doing and Sax is a member. Chimat's a member. And I just checked my Gmail. I checked all three of my Gmail
00:05:29
accounts, everything. No invite. You must have gotten lost again. Did you send a paper one? Was it like
00:05:35
you sent a goal card or something? Sax, how do I get invited to this private club? What is this private club?
00:05:40
Everybody wants to know. Well, we'll be happy to have you as a guest. Okay. Do I
00:05:45
have to wear a MAGA hat and have the courtesy MAGA hats at the door? If you want to be a member, obviously there are
00:05:50
dues and a membership fee, and Okay. I just didn't want to waste your time with an offer that I knew you wouldn't uh be
00:05:58
willing to accept. It's only $500,000 is what I read. Is that true? That's true for for founding members who
00:06:05
have additional benefits, but there's also a lower level that's the more reasonable membership level. So, I think
00:06:11
people are getting a little bit carried away with that number. Got it. Okay. That's why I wanted to clarify. Yeah.
00:06:15
Yeah. There's like 10 founding members who have that level and then there's a lower level for more average member.
00:06:22
Chimatha, are you one of those 10? Yes. Do you pay more if you have TDS or how does that work? TDS premium. What do you
00:06:29
talking about? Jal specifically or what are we talking about? the TDS search charge. Asking for a friend. It's a TDS
00:06:35
search charge. You put the tariff search we just we want a place to hang out in DC. All of us have been to clubs like
00:06:43
the Battery or I don't know if you go to LA like the I think places. There's Malibu Beach House. There's Bird Street
00:06:50
Clubs. There are places in Palm Beach that are really cool. In any event, we wanted a place to hang out. And the the
00:06:56
clubs that exist in Washington today have been around for decades. They're kind of old and stuffy. To the extent
00:07:03
there are Republican clubs, they tend to be like more Bush era Republicans as opposed to Trump era Republicans. So, we
00:07:11
wanted to create something new, hipper, and Trump aligned. Since I'm in the government, I can't be an owner, but I
00:07:18
told him I'd be happy to be member number one. And so, I, you know, said, "Great, let's let's do it." And so,
00:07:24
we're creating a place for us to hang out. That's basically it. We want a place to go where you don't have to
00:07:28
worry that the next person over at the bar is a fake news reporter or even a lobbyist or something like that who we
00:07:35
don't know and we don't trust. Got it. So, it's like any private club. You want to go somewhere that's highly curated.
00:07:45
This private club uh movement is happening all over the country, not just Washington. But we're creating something
00:07:49
that didn't exist before in DC, which again is younger, hip, Trump aligned, Republican. We're uh I I actually
00:07:57
started a Kamala club in um in the Bay Area. So um so we're Yep. I don't think anyone would pay to join that though is
00:08:05
the problem, right? I mean, it's an open bar, that's for sure. Where where do where do you guys meet
00:08:12
up? In like Redwood City. We actually meet up at the uh at the at the trade ports. All right. was we're 100 days
00:08:18
into Trump 2.0. It's just a random 100 day thing, but everybody's talking about everybody's hand ringing. What has it
00:08:26
been like for this first 100 days? How does it compare to Biden? How does it compare to Trump 1.0? 143 executive
00:08:32
orders, the most ever in the first 100 days. And they're moving obviously at a at a different pace to uh be generous.
00:08:41
Major indices are down 7 to 10%. Obviously, this trade war and tariffs, the yield on the the yield on the
00:08:49
10-year, it's down about 40 basis points. There's a lot going on. Let's go around the horn. Ryan Aaron, you're our
00:08:55
guest. What's your take on the first 100 days? Is it what you expected, good, bad, and otherwise, wins and fails,
00:09:02
everything. I'll go first. I think it's a whirlwind. I mean, if you look at the uh the John Boyd, the fighter pilot, has
00:09:09
this concept of the UDA loop, which is observe, orient, decide, and act. And the concept is that if you're in dog
00:09:15
fighting, if you're able to maneuver through those UDA loops at a faster pace than your than your competition, they
00:09:22
get disoriented and don't know what to do. And I I think that that's got to be how Democrats in Washington and maybe
00:09:28
mainstream Republicans in Washington. Certainly journalists are all feeling this like there's that the Trump Trump
00:09:34
administration takes action and before anybody can respond to that they have already done like four more things and
00:09:40
you're like wait I forgot to actually follow up on the other thing that they did that I didn't like. Uh, and so it's
00:09:45
yeah, it's pretty disorienting if you're if you're trying to they they can't find
00:09:49
a line to fall back to and go, "Hey, we're going to push back against this policy because they're already moving on
00:09:53
to the next one, the next one." Um, so that that's like my high level interpretation. Obviously, I come at it
00:09:58
from a trade angle. I think everybody knew that Trump was going to be he he told us during the campaign that the the
00:10:04
most beautiful word in the English language is tariff. Don't tell them it's an Arabic
00:10:08
word, but the most beautiful word in the English language. And so we knew that was coming. I think that the the the
00:10:16
suddenness of it all caught people by surprise. I mean, they told us April 1st, April 2nd would be Liberation Day.
00:10:23
They didn't tell us that it would go live the next week, you know, and effect you've already ordered these goods. So,
00:10:28
that's one aspect that people are kind of disoriented about. And we're gonna unpack. Yeah, we're going to unpack
00:10:35
that. Aaron, your thoughts on the first 100 days? Obviously you are a Democrat and uh you were pretty vocally not in
00:10:44
support of Trump. So what's your take on the first 100 days? Any any bright spots
00:10:48
for you things you you know support? Actually Sax's world I'd say has has been a bright spot. So especially I mean
00:10:55
I think we have a very clear message on AI and uh and that that that is that's been I think a huge net positive is um
00:11:03
you know if you look at the the past you know few months uh out of all the the AI
00:11:08
push from the administration it's unmistakably you know pro open source you know pro you know bring as much AI
00:11:14
innovation you know to the US obviously that the tariffs you know add a little bit of a headwind to that. I have some
00:11:19
very strong asks, you know, around high skilled immigration because I think that, you know, AI talent is going to be
00:11:25
super critical to to actually win the AI war. So, so I'd say that that directionally has has had some positive
00:11:30
momentum. You know, from my perspective, this is kind of playing out almost exactly how I thought it would 6 months
00:11:36
ago. And then 3 months ago, I I think there was some signs that maybe maybe, you know, it wouldn't play out this way.
00:11:44
um just based on some of the some of the you know kind of early groups that were
00:11:48
coming to the White House the the the the sort of deep business you know kind of centricity of the White House you
00:11:54
know I think it was day one or two that Stargate was announced you know at the White House we're going to go build
00:11:59
massive infrastructure the case I'd like to make you know once we talk about tariffs is is I think there's an
00:12:03
alternative universe where you just lean into acceleration as opposed to adding headwinds but but so that would be that
00:12:10
would be the case of what what maybe could have been you know very different is we just keep double down on doubling
00:12:14
down on what's working while fixing the parts that aren't working. But uh but that would be, you know, my my uh my
00:12:20
judgment so far. Chimath, I mean, you've been talking about it here every week. You and I have uh been talking about it
00:12:28
pretty consistently, so I don't think there'll be many surprises here, but take a second and maybe assess what you
00:12:33
think if you had to pick a singular thing that's gone really well and a singular thing you think could be
00:12:38
improved. What What do you got? Let me give you my overall grade. And then I'll tell you how I get to
00:12:45
that. I think the first 100 days have been a B+. And here's how I get to that score. There have been two things where
00:12:58
I think Trump has frankly hit a home run. The first is all of the direct investment and specifically the foreign
00:13:10
direct investment into the United States. I think it's approaching if not it has already exceeded a trillion
00:13:17
dollars from corporations and organizations and individuals from around the world who have committed to
00:13:25
bringing money into the United States. And I think strategically that's a legacy that will live past him. So, I
00:13:32
think that's been an A+. The second is we had a very unsafe border situation and he ran on shutting it
00:13:43
down. I'm not talking about the execution of the deportations. I'm just saying getting the illegal crossings to
00:13:50
zero and he's done that. So, that's been an A+. I think what's going to be more controversial are these next three
00:13:58
things though. But in my interpretation, I think the tariffs have been an A and I think that the market reaction,
00:14:07
the stock market is only down 4%. And the interest rate markets are, you know, 4 and a/4%. I think those have been an
00:14:14
A. Now the reason I think tariffs have been an A is because it is uncovered in my opinion how beholden we are to a
00:14:25
brittle supply chain and specifically to China who is a friend but who's also an
00:14:30
enemy and I think that that's going to really severely complicate our flexibility and optionality in the
00:14:38
future as they do what is in their best interests. Okay. So where have they then
00:14:43
not done so well? I think the documents have been frankly a D. We were supposed to get the Epstein files. We haven't
00:14:52
yet. We were supposed to get the Martin Luther King files. We haven't. We did get the redacted JFK files. I don't
00:14:59
think there's been very good communication about why it's taking so long. So I think it's a very small
00:15:04
narrow thing, but I think it had a lot of attention on the way in. I think the communications of the
00:15:12
tariffs and the back and forth have been a C. I think the markets were not led in enough of a way where they could
00:15:22
absorb the volatility. But if you take it all in its totality, I would give it a B+. I
00:15:30
think it's been a very productive 100 days. And when you look back, I think in, you know, 3 years, four years, 5
00:15:36
years. Okay, we've made some important progress. Saxs, obviously you're part of the administration, so I'm not sure
00:15:44
exactly how to ask you this, but you s you heard some nice compliments about AI from Aaron. I I happen to agree with
00:15:49
those. I actually agree with uh a good portion of the crypto stuff, too. I think actually getting those uh
00:15:54
tightened up, which are your two zones of excellence and your area that you're focused on. I think you've done a great
00:16:00
job there. So, just bestie to bestie, great job there. What's your Thank you. What's your take overall? You know, it's
00:16:06
kind of hard, I guess, to ask somebody in the administration to criticize the administration, but hearing everybody
00:16:10
else's take, what's your response, maybe? Well, I would I would highlight three main areas that I think are big
00:16:17
accomplishments for the Trump administration in the first 100 days. So, so number one has to be the border.
00:16:21
Like Jamas said, I think you have to give the administration an A+ on this. They've completely stopped the border
00:16:26
crisis. I think we all knew that Trump would take action on this because it's one of the main issues he campaigned on.
00:16:32
I think if you had asked any of us, you know, 4 months ago, would this problem be completely solved? Meaning, border
00:16:39
apprehensions completely stopped, border completely sealed within the first 100 days, I don't think we would have
00:16:45
believed necessarily that it would get done so quickly, but it has. Uh, recall that for 4 years during the Biden years,
00:16:52
we were told for the first 3 years that the problem didn't even exist. Whenever the videos were published of caravans
00:17:00
coming or throngs of people running across the border, we were told that these were cherrypicked videos on Fox
00:17:06
News. It wasn't real. Finally, in the last year of the Biden administration, they said, "Okay, we're finally going to
00:17:12
do something about it." They took some limited actions and they said that doing more than that would require new
00:17:18
legislation. Well, all of that was just gaslighting. It turns out Trump came in,
00:17:22
he restored remain in Mexico and other policies, completely stopped it. He had this line at the state of the union
00:17:27
which I think is exactly right which is we didn't need a new law we just needed a new president. So I think that's area
00:17:32
number one. Area number two I would say would be the vibe shift in the culture around wokeism and DEI. You know how
00:17:41
quickly we forget about this but wokeism has completely collapsed. Uh I don't know that anyone is endorsing in a
00:17:49
fullthroated way. Moreover, beyond just sort of the cultural aspect of it, I think we've had significant policy
00:17:55
changes on DEI. Trump has basically ended DEI at the government level. He also signed an executive order ending
00:18:04
the use of disparit impact for affirmative action. This is the policy that said that even if you have a policy
00:18:11
that's applied in a completely neutral and objective way, if it results in a disparate impact where different groups
00:18:17
are represented in a different way in the outcomes, then somehow that must be racist. And that led to essentially
00:18:25
engineering the results of various populations to basically fit quotas. And I think all of that now has fallen by
00:18:34
the wayside. And I think that meritocracy and colorblindness are back. The only hold out really has been these
00:18:40
universities where Trump is now taking action against Harvard and I think that ultimately we will win that battle. You
00:18:47
see that even in relatively liberal companies the DI departments have been cancelled and they're moving back
00:18:53
towards more of a meritocracy. So I would say that that's like big shift number two. And I think if any of us had
00:18:59
tried to predict that 100 days ago, we would have thought yes, Trump will do something about it. But I don't think we
00:19:04
would have predicted the total collapse of wokeism and DEI so quickly. And then I'd say the third area which is still in
00:19:13
flight is the rep privatization of the economy. That's a term that Scott Besson used. I think that the Trump
00:19:19
administration needs to reprivatize the economy. And I like that framing of it. And there's a bunch of different pieces
00:19:26
under that. I'd say number one is Doge again ending this hogw spending. I do think that Trump has come into office
00:19:36
inheriting a very weak Biden economy that was being propped up by massive amounts of government spending that was
00:19:42
not only stimulating the public sector, but it was also gooseing the employment numbers as well. And we knew that that
00:19:49
spending was unsustainable. We have to do something about it. So, I think for the first time in decades, we've
00:19:54
actually started to make real cuts in government, real cuts in the federal workforce. And look, we'd like to do
00:20:01
more, but that is a huge shift in the conversation. There's other pieces of it as well. I mean, President Trump has
00:20:08
signed a significant number of executive orders on deregulation. There's also been unleashing energy. He ended Biden's
00:20:15
EV mandate and a lot of these like green new scam projects, offshore wind, and he's been encouraging oil and gas
00:20:23
exploration. So, I think there's that. And then I appreciate what Aaron said about tech innovation. We did repeal
00:20:30
Biden's exec order on AI, which was, you know, 100 pages of unnecessary regulation on AI. We've ended the war on
00:20:36
crypto, and I think we're trying to stop the regulatory capture that benefits large incumbents. So, you have all these
00:20:43
things, and there's been other things that that have been done on the economy as well, but I I do think that this sets
00:20:47
us up for a Trump boom in the future. It's just that a lot of these changes take time to to play out. Okay, great.
00:20:56
Well done. And well, I think I think I think we knew Sax would be very pro. Chamas uh Chamas seems really pro other
00:21:03
than he wants like the alien conspiracy files released which we'll get soon. What is the what is the view from Jay
00:21:10
Cal when the where you're the the the leftleaning guy in the in the room? Uh you know I'm kind of independent but
00:21:17
yeah social liberal. You know I I look at what all Americans believe and and try to build some consensus here. It's
00:21:24
one of the things I've been trying to do on the pod is look for where we agree. Americans universally want the
00:21:30
border secured. They don't want illegal immigration and they don't want fentinel. So this is the biggest win I
00:21:36
think for Trump which I think everybody on the panel pointed out and Sachs you were dead right like when we were seeing
00:21:41
those videos some of them were 5 years old some of them were recent. Biden really covered up what was going on in
00:21:46
the border and it took years to figure out what was exactly going on there. So that's the biggest win possible. I I
00:21:52
give overall just to be brief a B for this first 100 days and I give you know Biden like a C minus. The second
00:22:01
thing that everybody agrees on is they want to downsize the government. They don't want waste and fraud. So I think
00:22:04
Doge is the other huge win. The things I think that could be improved really just
00:22:10
three simple things. The economic uncertainty is really terrible for running a business. I'm seeing a lot of
00:22:15
folks in my circle on my podcasts this week in Startups and here telling me, "Oh, I don't know how to plan for the
00:22:22
future." And we're going to get into that with this tariff stuff and the trade war. And so, I think economic
00:22:27
uncertainty, we have to sort of slow down and maybe make it easier for people to understand what the administration is
00:22:34
trying to do. I think rule of law really matters to people. People didn't like Biden's pardons. They didn't like
00:22:40
covering up his mental acuity. And I don't think people like the deportations without due process. We talked about
00:22:45
that on a previous episode. Overwhelmingly, people want Trump and the administration to obey what the
00:22:52
Supreme Court says. They really want rule of law, the third term talk. Like eight out of 10 Americans don't like
00:22:58
that kind of talk. Um, and then conflicts of interest. Obviously, people hated the Hunter Biden stuff. They hate
00:23:04
the memecoin stuff. And so that's where it could improve. crisper communications, more thoughtful
00:23:10
execution, maybe less trolling. I don't like the White House Twitter account trolling. And then focus on what got
00:23:16
Trump here. You know, you all said the same thing. What got Trump in here was the economy. And one thing that wasn't
00:23:22
mentioned by everybody is the peace dividend. And Trump is making massive progress in Ukraine, apparently. I don't
00:23:29
know if it's on the docket today or not, but stopping the wars and making the economy boom, those are the two most
00:23:34
important things that he could do. Build on that. I I totally missed that. You're
00:23:38
absolutely right. That's another one where I would give Trump an A+. Nat and I had dinner with POTUS two weeks ago.
00:23:45
And wait, you had dinner with Trump? This is breaking news. Well, okay, whatever. Yes. Well, I think it's I
00:23:50
think it's remarkable how much of a Putin apologist Jake House's become. I mean, you want to end the war in Ukraine
00:23:55
now? Well, you're going to you're going to give it You're going to give it to Putin? You're not going to stop Putin.
00:24:01
I'm totally in favor of what Trump's doing in in negotiating a deal to get more money. Oh, you want to talk to
00:24:06
Putin now? I've always wanted to talk to Putin. I just don't trust him. But you you can trust him. Let me tell you what
00:24:12
Trump said. So, there we go. There was a handful of us at dinner and then he got
00:24:18
up to say a few words at the end and he reminded me why I was so inclined to vote for him, which is he talked about
00:24:29
his uncle and he talked about how his uncle taught him about the severity of nuclear war
00:24:36
and how people don't understand how intense and how destructive it is and the power of these weapons and he left
00:24:47
that speech at the end saying and this is why I'm so fundamentally against this thing and it reminded me to your point
00:24:54
Jason it is so easy to forget that there's only one existential risk save like aliens coming from the
00:25:02
heavens, right? There's only one existential risk where all these issues become fringe issues. You know, you
00:25:07
mentioned rule of law, border security, foreign direct investment, tariffs, it all goes out the window in a nuclear
00:25:14
war. And I was like, I am so glad this guy's in charge because this one issue, he never waivers.
00:25:23
Yeah. And I think there's all kinds of complicated moments that could make this an issue. And this was where my biggest
00:25:31
issue with Biden was was I did not know who was in control. And I think that Trump in the first 100 days, to your
00:25:37
point, I think has completely reinforced that there are no conditions under which
00:25:42
he'll go to war. He has time and time again showed find the off-ramp. And I think that that's really healthy for
00:25:47
Americans to see. Yeah. And let me build on that point with respect to to Ukraine
00:25:51
is we were on a glide path before the Trump presidency that Biden had put us on a certain path. Kla Harris gave every
00:26:00
indication she would have continued it. What was that path? It was a path of continued escalation and doubling down
00:26:06
in Ukraine. Recall that it was Biden himself at the beginning of the war who said that if we give Ukraine Abrams
00:26:13
tanks and F-16s or attackums or high Mars or if we allow them to hit targets inside of Russia, it would lead to World
00:26:23
War II. He actually used the word Armageddon. So at the beginning of that administration, they were very concerned
00:26:30
about how an escalatory path could lead us into direct conflict with Russia and World War II. And yet, despite that, at
00:26:38
every fork in the road where they had a choice, they ended up doubling down. They gave the Abrams tanks. They gave
00:26:42
the F-16s. They gave the High Mars. They gave the attacks. And finally, when Biden was a lame duck in his last couple
00:26:48
months in office, they did the most reckless and irresponsible thing, which is allow American weapons to be used to
00:26:55
strike targets on Russian soil. Not just fighting in Ukraine, but on Russian soil. Moreover, we now know from a New
00:27:01
York Times article that just came out in the last few weeks that it was American
00:27:05
generals and American intelligence who are planning this war. So, when you're talking about striking Russian targets
00:27:10
on Russian soil, it's not just the Ukrainians using our weapons. They're using our targeting, they're using our
00:27:16
guidance, they're using our satellites. I mean, we are deeply integrated in the kill chain. This is the United States
00:27:21
being a co-elligerent in the war, hitting Russian soil. That is incredibly reckless and dangerous. I have no doubt
00:27:27
that if the Democrats were still in office, we would be in an escalatory spiral right now with the destination
00:27:34
being World War II. And I do think that Trump has pulled us back from the brink there. There's obviously still more work
00:27:40
to do. But I really appreciate the efforts that Steve Wickoff has undertaken where for the first time in 3
00:27:46
years, we've at least had direct diplomacy with the Russians. We weren't even talking before. We weren't even
00:27:52
talking before. I mean, talking is a great thing and and and apparently we're going to keep supplying with them with
00:27:57
weapons as long as they pay for them. So, it's going to be very interesting to see how this all hashes out over the
00:28:02
next 100 days or so. Let's keep moving. I don't think we know that yet. Let's let's wait and see on that. Okay. Yeah.
00:28:08
I mean, I think that's Yeah. Uh what was reported, but you're right. We should wait and see. Okay. Downstream tariff
00:28:15
impacts. We got to talk about this, and this is why we have you here, Ryan, since you're in the thick of it. you
00:28:20
tweeted a thread last week about the lag time uh of shipments from China and when
00:28:26
you were on I guess during COVID you really educated us to how the supply chain how the supply chain
00:28:32
works and according to the thread that you shared somewhere around early June we're going to expect warehouses
00:28:40
trucking the entire supply chain maybe to start to seize up or layoffs I don't know how you would frame it Ryan but are
00:28:49
we asked the point of no return with regard to the supply chain. Is there an off-ramp for this tariff conflict war
00:28:58
negotiation with China in your mind? What are you seeing on the streets and in the purchase orders and the invoices
00:29:06
at Flexport? Definitely not past the point of no return. I think we're still right in the middle of the don't judge
00:29:12
the cook while he's cooking is one, you know, like let's see what the we'll see what it tastes like at the end is I
00:29:16
think a starting point here and we're still they're still in active negotiations. So I don't think today's
00:29:20
it's not static. Now the world does want a lot more certainty and that's a big cause of what's happened here and what
00:29:27
has happened is a 60% decline in bookings of ocean freight from China to the US. I mean so that's really really
00:29:33
pretty dramatic like probably exceeding what was expected. I don't think, you know, when they issued when they rolled
00:29:40
out the initial reciprocal tariff plans on on April 2nd, it was meant to be a 54% tariff on China. Then, you know,
00:29:47
there's multiple cycles of escalation. We ended up at what's now 154% tariff. So, this is this is a lot higher than
00:29:56
anybody planned for. And so therefore, I don't think anyone's planning for a 60%
00:30:00
decline in ocean freight. Ryan, let me ask you a question about that. Are people actually paying that 154%?
00:30:07
There's been this discussion online and it's it's sort of unclear from the administration and from
00:30:14
retailers stuff that's landing that people ordered before April 2nd. Are they actually paying the 154% on top of
00:30:22
what's landing? It's it's live now. Um it is it was based on departure date. So goods that departed China after midnight
00:30:30
Eastern time on April 9th are subject to the tariffs upon arrival. And so now enough time has passed that pretty much
00:30:36
all the ships that are arriving now left China after April 9th when that started.
00:30:40
Um so yes. So what happens? People are paying it or are people saying I won't take delivery because it's Jason you
00:30:45
have you have to pay it Ryan correct me if I'm wrong but you have to pay it at the dock in order to get the goods
00:30:50
released. More or less more or less that's true. They they allow you have a bond in place so you can pull the goods
00:30:56
out before you pay but it the money's owed at that time and then you get you get like a two week time frame to
00:31:01
actually make the payment. But there are strategies here. a lot of people are doing that you can use what's called a
00:31:06
bonded warehouse and move cargo into this warehouse uh and then you only owe the duties when the cargo leaves that's
00:31:12
what I was asking like is there a hack here to it's not that that lets you defer things and it's very very common
00:31:17
right now people are searching everywhere for bonded warehouse capacity because in a bonded warehouse not only
00:31:22
you defer payment to when the cargo leaves the warehouse but you only owe the duty amount based on at that date so
00:31:30
if the duties come back down which a lot of people are betting they will on the China specific speific duties, you'll
00:31:35
actually lower your tariff burden. And then there's another hack for this, which is effect use a Mexican or
00:31:40
Canadian bonded warehouse. So you move the goods into Mexico and then you actually only technically import them
00:31:46
into the US at a future date when tariffs are lower. So I understand a lot of a lot of companies are doing that
00:31:51
right now, too. Um we're helping some people with that type of strategy, but yeah. Is that Sorry, Ryan. Do you
00:31:57
think that the government will they view that okay that kind of hack and or like
00:32:03
you know like if you look at the GDP numbers one of the craziest things was the inventory pull forward that people
00:32:08
did to your point like trying to get as much stuff into the United States before
00:32:13
April 9th as an example. Yeah. I mean it's not a hack. It's a bonded warehouses are been around for decades
00:32:19
and they're they're very commonly used. I don't know that it'll be that material
00:32:22
in the scheme of things that it would, you know, cause a change in the law around bonded warehouse. So, you don't
00:32:28
think, for example, the Department of Commerce will have an issue with the strategy of sending inventory into
00:32:36
Mexico that essentially you're essentially like, isn't it, it's a work? Like, instead of paying the China
00:32:42
tariff, now you pay a Mexico tariff, which should be less. Is that the idea? Well, you can move it into a bonded
00:32:47
warehouse in Mexico even and not pay Mexican tariffs either. and you just wait until it imports. But I mean,
00:32:52
what's the Department of Commerce or the customs to do? It's sort of you just delayed importing the goods. You've
00:32:58
imported them in the future and you know, it doesn't I I wouldn't even call it a hack. It's just sort of like people
00:33:04
people are going to get creative here. You know what I mean? Like that's the job. Actually, the government should set
00:33:08
the rules and the rest of us got to figure out, all right, how are we going to compete and make money in this
00:33:12
environment that they've created? Ryan, in that tweet you redid, which was a pretty dramatic tweet painting a very
00:33:18
like I don't know, you know, like a pretty dire situation. Where are we at in terms of how uh dire this will get or
00:33:28
resolvable? paint us the the the best case scenario and what you expect could happen in that case or if this gets
00:33:35
extended are we going to see as you know people are hand ringing empty store shelves Christmas gets ruined and all
00:33:43
these layoffs start happening in the supply chain take us through the two scenarios that people are debating yeah
00:33:48
I mean the the the bleak scenario which is I don't really think it's going to happen I think that the administration
00:33:53
doesn't want this to be their legacy that they like created a policy that just like kind of tanked small business
00:33:58
and supply chain. So, I don't I don't actually think this is going to happen, but the bleak scenario is tariffs stay
00:34:03
at this level for 145% on China. The 10% goes way back up to what it was originally announced in reciprocal
00:34:09
tariffs. So, there's no like safe haven for tariffs and trade just falls off a cliff and a lot of companies go bankrupt
00:34:14
in our in our especially small companies are the ones that are importing from China. Reality is like tariffs have been
00:34:20
high on China for a long time. Labor costs in China are not are not there for cheap labor. You're there for quality
00:34:25
manufacturing at this point. like there's much cheaper labor in Southeast Asia, other parts of the world than
00:34:30
there is in China. So you're in China because of the manufacturing capabilities, the ecosystem, not just
00:34:35
for cheap labor. Uh and if you could have moved, you would have already with the 25% tariffs from the Trump's first
00:34:41
terms were pretty were high enough incentive. And so that's the bleak scenario is that small business starts
00:34:48
getting wiped out. The ones that are buying from China and it's a lot of brands like it's not just Amazon seller
00:34:53
selling stuff that you don't need. It's like all the brands that you know are like you know fashion brands, apparel
00:35:00
brands. I had cuts clothing on this weekend startups last week and he said there's going to be like if this doesn't
00:35:07
get revol resolved in like let's say two to four weeks in his group chats people
00:35:11
are going to start layoffs and they they can't physically restart the supply chain in
00:35:18
Vietnam or wherever to make t-shirts. So Aaron what's your thought on this as well just bringing you in. Sure. Well,
00:35:24
well, first of all, I mean, Ryan has supplied me with a high degree of doom scrolling and uh it's just like a horror
00:35:30
show reading his tweets. First of all, I I like I would feel better if the messages out of the administration were
00:35:36
either more kind of consistent or that there was a logical connection between do we either want to raise the kind of
00:35:46
you know tariff revenue stream or do we want free trade like like those things are are working against each other
00:35:52
because like depending on who you talk to they they say this is a a mechanism to bring down income tax which obviously
00:35:57
then by definition means that they expect the tariffs to sort of persist. um which is totally different from let's
00:36:03
go negotiate deals that just allow for the you know free trade to actually increase and so are we worried about the
00:36:09
reciprocity or we worried about kind of revenue stream so that's a whole whole issue you also have this issue which is
00:36:15
the messaging from the government and this is the meta point I'll make in a second is about is about how we could
00:36:19
have actually accelerated into the transformation of the economy but you know you have folks like Lutnik etc you
00:36:25
know going on on TV talking about the the end state of our economy which are are actually probably you fine messages,
00:36:31
but but we haven't seen what that vision looks like, you know? So, everybody is kind of confused like does this mean
00:36:37
that we literally go into manufacturing plants and we're like the ones literally
00:36:40
doing the screws on an iPhone or is it a bunch of jobs which are next generation,
00:36:45
you know, jobs which is like we're managing robots and and like shipping and logistics grows as a result of this
00:36:50
and all of the surrounding kind of supply chains, you know, start to grow. So like like you know to like there's a
00:36:56
there's an underlying I mean you know mo most people on this call have managed teams like you do change management you
00:37:02
lead people to the end state that that you want them to sort of see the potential in and I think some something
00:37:08
that kind of gets missed is and the part that kind of confuses me is like I don't
00:37:11
know if if to you know exactly to Ryan's point like people are in China because of the ecosystem of manufacturing yet
00:37:17
the messages you get out of the administration are like oh you know we're going to have fewer toys at
00:37:22
Christmas time. It's like, no, that's not the big picture. Like, the big picture is is like, like, you know, this
00:37:27
is supplying the parts that go into building a manufacturing plant and building a car that that allows us to
00:37:33
actually, you know, be even remotely competitive in car manufacturing. So, where should in your mind this all lead?
00:37:39
Because you have some thoughts on American exceptionalism and maybe skating to where the puck is going. So
00:37:45
for if you were to become an adviser Yeah. on this as a technology expert and and somebody who spent their whole
00:37:51
career in it, what would you advise them to do? I'd get rid of Navaro immediately
00:37:55
and and you would basically say, you know, Mia Kulpa, like oops. And like obviously you need to like land that
00:38:02
with some really cool trade deals that make everybody kind of feel happy. And you basically say, you know what, like
00:38:07
let's go back to the first two days of Trump, which is let's announce massive deals. We're bringing manufacturing here
00:38:14
with Stargate. We're doing TSMC. We're building Nvidia chips. We're going to do a deal which is you get like 5% tax uh
00:38:21
rate if you build in America. And so you just stimulate a a manufacturing boom in
00:38:26
in the country. You know, we incentivize, you know, automation across the manufacturing. We use that as a
00:38:32
competitive weapon to go and compete with with the the sort of lowerc cost labor that that that happens
00:38:37
internationally. You know, we we find every incentive and tool we can. we deregulate, you allow people to build
00:38:43
these plants and so you don't have to go through the, you know, three-year EPA process like like you you just
00:38:48
accelerate from from this position and you see you see it all as upside and so then business leaders, you know, if you
00:38:56
go talk to the Fortune 500 company that actually has to build, you know, anything right now, you give them a path
00:39:01
to say, listen, we're going to help you transition away from your current supply
00:39:04
chain and we're going to make it even more competitive and more compelling in America to do that. You know, there's a
00:39:10
reason that Elon builds in America like like he has he's actually made it be more effective to to be able to to, you
00:39:16
know, bring automation to manufacturing, to be able to to build locally, but he wasn't forced to do that. And so so I
00:39:22
would just I would argue like you you use as many carrots as possible in some surgical areas. And Chimath, I've heard
00:39:28
your points about the like, you know, chips, pharma, you know, AI, like in those surgical areas, we get tough where
00:39:35
where necessary. Um, and and if we have to do, you know, a couple sort of very surgical tariffs, you know, to kind of
00:39:41
make make people move the the direction that we want, that's totally fine. But I
00:39:45
I mean like like it's like the even arguing the premise is hard because because we act like we're like like it's
00:39:50
like countries that are screwing us, but actually businesses are are independently making decisions about
00:39:55
where they want their supply chain to exist. They they have in a free market they've made that decision. They don't
00:40:01
need the government to tell them where where are they supposed to or where are they allowed to to have their supply
00:40:06
chain operate. that that ends up with just lots of economic distortions that everybody on the the right would have
00:40:12
called, you know, the left socialists for trying to kind of implement central planning around supply chains. So that's
00:40:17
my piece. Well, no. What do you think, Chimath, here of this sort of reframing/offramp and sort of maybe the
00:40:23
positive spin on it, hey, if you want to make t-shirts, you know, you want to make commodity items, have at it. Free
00:40:29
trade, you know, reciprocal tariffs, great checkbox there. But here is a series of incentives and a path forward
00:40:37
to do the advanced stuff to do robotics etc. Let me answer this in a different way. Okay, a lot of those things he's
00:40:45
actually doing. I think this is where we are is we're beyond TDS. There's something that comes after
00:40:54
it. And I think that the mainstream media has just lost their mind to a degree that they hadn't even lost their
00:41:03
mind in Trump one. I'll give you a couple of examples. Um well, one example, by the way, just a shout out to
00:41:09
our friend, completely brazen, ridiculous, shitty reporting by the Wall Street Journal last night. When they
00:41:16
were told that this, you know, this whole Tesla thing was a total farce, they continued to publish it. Okay,
00:41:22
fine. They're they were referring to Elon. The board Yeah. starting a search to replace Elon and then the board said,
00:41:29
"Well, wait. We told you we weren't doing that." And they didn't even mention they communicated that directly
00:41:34
to the Wall Street Journal. The Wall Street Journal said, "I don't care. I have an axe to grind." Correct. Yeah. I
00:41:41
think that Trump has a strength, which is he shapes these potholes for the mainstream media to fall into. The
00:41:48
downside of that though is that that the mainstream media then doesn't do the other part of the job which is to tell
00:41:53
the things that are important. So for example, we spent a lot of time breathlessly talking about the MS-13
00:42:00
knuckles of the guy, right? Or then we spent a bunch of time talking about how MSNBC blurred out the names of the
00:42:09
placards on the lawn. Okay, but here's the other part where then they get so tilted. Here's what they don't report.
00:42:17
They didn't report that, for example, when Trump took a shot at Harvard, he also reinforced and strengthened
00:42:25
historically black colleges and universities. Totally did not get written. I'll give you another
00:42:31
example. This past week, Bessant said that the tax bill will allow you to fully deduct all the
00:42:41
PPE and all of the incidental costs of building a factory. I heard that, I immediately went to my wife. She runs a
00:42:50
pharma business. This is exactly what she's trying to figure out. And we now are like, how do you build a business
00:42:57
case if this actually gets effectuated? The point is that thing would create an absolute economic
00:43:07
bonanza if it were to get passed. Other than people hearing it on this pod or randomly maybe finding it on
00:43:15
a direct clip that Bessant puts out on X, there has been zero coverage by the mainstream media. Yeah. But but like
00:43:22
like the the uh first of all that Yeah. Okay. MSM and whatever we want to call it aside like the that is that is still
00:43:30
on the administration for driving a a change management process that that causes people to build on momentum and
00:43:37
not causes boards to basically say oh are we going to pivot our entire supply chain this week because because Trump
00:43:43
you know didn't get a call back from from sheet like like that that is like this is really not a a a TDS MSM issue
00:43:51
this if you talk to Fortune 500 CEOs did you know about the PPE thing No, but that's not but like I'm I don't need to
00:43:57
like the thing that I know but there are many other CEOs that do they they're controlling trillions of dollars of
00:44:02
capital allocation. It's an important thing. If we had if we had Mary Bar on this call and and we said Mary has has
00:44:10
you know Trump increased your ability to execute and operate and accelerate the the transition to the US or has he had
00:44:16
headwinds that make it tougher to navigate right now? Which which way do you think she'd go?
00:44:22
I think that she would give you a calculated answer that neither is pro or con. I think I think that answer changes
00:44:27
by the day. I think that if you talked to her last week, she would say this has been a major headwinds and then
00:44:32
yesterday to Chimal's point, they did this thing where you can depreciate or fully expense in year one capital
00:44:37
improvements or building out factories. But also earlier this week, they made it
00:44:42
so that auto auto parts are not subject to the tariffs. They created a huge exemption that wasn't there everything
00:44:49
like they should have. By the way, This all speaks if this was a bit planned, it
00:44:53
should have been there in the beginning because these auto auto companies were saying, "Hey, this is going to bankrupt
00:44:57
us if we have to pay taxes on where I would take circling back to communication and making a crisper and
00:45:03
clear, Erin, where you are right expectation is it's my job to stay informed." Okay. As a CEO of my company,
00:45:11
I try to stay informed and you're right. It is hard because sometimes I find myself hunting and pecking to find the
00:45:17
things that matter. But I do put a bunch of that responsibility into the lap of the people that are supposed to actually
00:45:24
report the facts. They can choose. They didn't have to run that article about Elon, which turned out to be total
00:45:31
and horseshit on the front page of the Wall Street Journal. They could have talked about what Ryan just
00:45:36
mentioned as the first article and said, "Here completely changes your ro and roe
00:45:42
calculations for 90% of the S&P 500." That was not the article they chose to write and to publish. I but I also think
00:45:49
it comes back to my original point around the UDOT loops that they're the Trump is the administration is running
00:45:54
these very tight hey let's take an action let's see what happens let's see the reaction and then take another
00:46:00
action and Washington's used to doing all these committees that plan everything for 5 years or something or
00:46:04
whatever 18 months and then roll it out slowly and they're going hey let's roll it out oh crap we're about to cause this
00:46:10
huge problem in the auto manufacturers and they're all telling us they're going to go bankrupt okay 3 days later they
00:46:15
push an update and it's kind of it feels chaotic But yeah, to summarize, Ryan and
00:46:20
Aaron, your position so we can keep going through the docket. Hey, a little less shock and awe, maybe a little more
00:46:25
predictability, a little crisper communication, and Chimath, I think your position is, hey, maybe the mainstream
00:46:30
media can play a better role here in focusing us on what matters. That wouldn't be my takeaway. So, yeah. Okay.
00:46:36
Um, my my What's your takeaway? I mean, like like zero shaken like like not a little less like like I like my strategy
00:46:44
would be 100% different. Actually, uh, Scott Besson has an incredible podcast from like September of last year, and he
00:46:50
basically said, you know, Bid Biden got it all wrong. And I was like listening to it. I was like, oh, okay, actually,
00:46:56
this is kind of cool. Like, he basically says, deregulate the US, make it easier
00:47:01
to build manufacturing in the US, increase the GDP, and then you'll be able to take in less tax revenue, spend
00:47:06
less in the government. And it was like, oh, this is actually like a glide path.
00:47:10
We could take we could take the fact that we did a soft landing relative to the rest of the globe. We're winning in
00:47:16
AI. We're winning in it in in you know, you know, number of categories. We obviously need more energy. We need we
00:47:22
need to bring in manufacturing into the US. And and so you you have this great momentum which is where we are the tech
00:47:28
leader, you know, in the world. Let's like just pour fuel on that. And so to pour fuel on that, you you do you just
00:47:34
do a series of carrots and and the and the winds that build a flywheel of positive energy. Like the reason why I
00:47:40
take I take a little bit of exception to to Chimas's MSN point is that I think to
00:47:44
some extent Fortune 500 CEOs are not the ones like oh my gosh like like Rachel Matto said this like I'm going to go and
00:47:51
and you know worry about this topic now like like the information coming at them
00:47:55
is is I'm not talking about the information that's presented. I'm talking about the information that's
00:47:59
excluded. How do you get the information that's not published and shared broadly?
00:48:03
No, no, but but come on. Like like Goldman Sachs and JP Morgan are not writing reports on the fact that we
00:48:08
might enter a recession because of of MSNB's MSNBC's reporting on this topic. Like like again, but again, that's not
00:48:15
what I'm talking about. I'm saying like gladhanding some highlevel prognostication which nobody ever gets
00:48:21
right is in my opinion worthless. What I'm talking about is the details. So when you talk about something as narrow
00:48:28
and specific as excluding PPE or allowing you to double or triple depreciate something in a given calendar
00:48:36
year, fantastic. That is narrow. It's precise. It's specific. It's actionable. And what I'm saying is if I surveyed the
00:48:43
500 CEO of the S&P 500, dollars to donuts, the overwhelming majority would not have known. And had they brushed up
00:48:50
against that somehow in their normal media consumption to then ask their teams, the odds of that would have been
00:48:56
zero as well. So I guess then who do we who do we blame for this chim? Is it the
00:49:01
administration's job or mainstream media? But I bet you everybody knows about the blurring out of the stupid,
00:49:06
you know, pictures on the lawn and the MS-13 knuckle tattoos. Yeah. Okay. So let's uh wrap up on this just really
00:49:12
lightning round here. Amazon flip-flopped on a new tariff notification on their websites. Trump
00:49:19
said he had a great discussion with Bezos. He solved the problem very quickly. He did the right thing, good
00:49:24
guy, etc. If you haven't seen this, it's something that Teimu is doing. Here's what Timu does uh currently today. Nick,
00:49:33
you have that image. If you could pull it up of just when there is a tariff, they explain the tariff coming into the
00:49:39
country. They put it as like a line item. I thought this was actually kind of cool. I don't know why people take
00:49:45
offense, Brian. This is pretty standard stuff. So Amazon's competitor Tim Teimu is putting in the import charges. They
00:49:51
don't say tariffs. They don't say taxes. Import charges. This is like a standard
00:49:54
thing. This happens in other countries too. What is this? What is Teeu? This is like a dollar store. It's basically like
00:50:00
a dollar. Is it this the last place you would ever buy jeans? Yeah, you can buy $12 jeans.
00:50:06
Basically, your left sock from Laura Piana costs less than Timu's entire inventory of jeans. The point being, um,
00:50:15
I thought this was actually a plus for I think they totally misplayed this. They
00:50:21
they they did it, they rolled it out, then they got criticized. I think they were called a treasonous company from
00:50:25
the White House press uh, you know, by the press secretary. Uh, they totally misplayed this because they should have
00:50:30
gone and leaned into it and said, "Yeah, we're showing you all these tariffs when
00:50:34
you buy from China. If you buy from America, you don't have to pay any tariff and look at all these other
00:50:39
products." Come on. Come on. That would have lasted three and a half seconds. This is exactly consistent with the
00:50:43
other issue which is they're playing whack-a-ole. Okay, we're going to do something with the automakers. We're
00:50:48
going to we're going to try and solve some problem with Amazon. Like like this is a sign that that it like it's not a
00:50:55
good strategy if you have to do this much whack-a-ole. Like like they they're not like they can't cover up what Amazon
00:51:01
is going to end up dealing with because there's going to be 500 other retailers that that don't get the call with Trump.
00:51:06
So, so this is like that that like to me that's evidence of of clearly this they
00:51:11
didn't think through the entire downstream set of of of conditions that are going to change as a result of this.
00:51:16
Sure. Yeah. I I thought this was a big win uh Chimoth because they could then have Amazon Here's um a mockup somebody
00:51:25
made. I'll pull it up here. It was interesting. They could to Aaron's point just show hey here's a bunch of American
00:51:32
companies by American when you do a search. Ryan's point. I'm sorry, Ryan's point. Hey, here's what it might look
00:51:37
like. Pull pull that um the OralB toothbrush one up, Nick, if you got it right there. So, somebody mocked this
00:51:43
up. I think this could be the hugest win. You could have the retailers do buy American, buy it once, buy a high
00:51:50
quality product from America. If you look here, we don't have the products. It wouldn't work. We don't have the
00:51:56
products. Well, I mean, we do have for some products, you know, Americanmade products. Uh, you know, I buy my boots
00:52:03
from Danner and those are all American. Yeah. So, we should just go back to communism and we're all going to make
00:52:08
our our shoes. Like, it's like that's like we we're in a global market. Like, we buy from everywhere. Chamop, any
00:52:14
thoughts on this? I mean, obviously there's the whack-a-ole angle. There's buy American and be proud of it. There's
00:52:22
communication. Here's the narrow question. I I got a bunch of emails from people and a bunch of them were Amazon
00:52:29
sellers and I don't know Nick if you can find it but I posted their comments and
00:52:34
I reshared them just to kind of highlight the issues that they were going through and at the core of it was
00:52:41
a feeling by them that Amazon had abandoned them as American purveyors and sellers of goods and that Amazon on the
00:52:52
margins had attended to help competitors from abroad come stand themselves up and compete and
00:53:03
essentially cannibalize on price and margin. This is my view completely and that this is the biggest opportunity
00:53:08
that I think the Trump administr administration's flying at 40,000 ft doing macrolevel negotiations and look
00:53:13
and failing to see some of these micro optimizations that are really really real. So you in the United States you
00:53:18
can import goods as a foreign company. You don't not you do not have to create an LLC or any sort of registered entity
00:53:25
in the United States to import goods. Sometimes they say, "Oh, Americans pay the tariff." Like that is not true. In
00:53:31
many many cases, the foreign company just imports this stuff and they sell on Amazon. And when they get caught
00:53:36
cheating, they can they can lie about the valuation and pay a lower tariff. They can change the classification and
00:53:41
pay a lower tariff. They can import stuff that, you know, is harmful to children, has lead, paint, whatever
00:53:46
else. There's no enforcement at all. You can't. So you're saying Amazon third party is like a bit of a backdoor to
00:53:52
abuse the system, right? I mean, Amazon is sort of just playing the game that's on the field, but they're this is legal
00:53:57
in the United States is these companies import stuff and I think it's 60% of all
00:54:00
of all the sellers on Amazon are these Chinese registered. They're not registered in the United States at all.
00:54:04
Just Chinese companies. Which sounds profoundly unfair in terms playing field. Can we just take a step back and
00:54:10
also acknowledge that we are talking about a level of detailed issues that we would never have talked about 6 months
00:54:17
ago. That there was no interest in even bringing this up. Like if if Ryan wanted to bring up the
00:54:25
sort of hollowing out of American salesmanship, let's say, if you will, because of like this arbitrage
00:54:33
that Amazon does for GMV. That would have been a snoozefest. except today it can actually get a lot of awareness and
00:54:41
Erin mentioned this and I've mentioned this before but like I think that there are four things that really matter
00:54:46
batteries AI pharma APIs and rare earths that now is on the agenda I think the the positive way to look at this is the
00:54:54
American economy is too complicated if you had waited Aaron for a study for all of the implications we would have been
00:55:01
waiting forever and nothing would have happened and I think that we've made macrolevel moves you're right and now we
00:55:07
are finding what the implications are in course correcting in real time. And I hope what happens though is when we find
00:55:14
these big thorny issues, I think the Amazon thing is a is a pretty interesting issue actually about like
00:55:19
American competitiveness. Now the question is do we follow through and get to the root cause of it and and fix it.
00:55:26
And those feedback loops are there. I mean the Trump administration is going to act on this and if then there's an
00:55:30
act that's coming out of Congress as well to shut down the foreign import of records. So those feedback loops are
00:55:34
there in ways that I don't I don't know if they were there in the past. Go ahead, Erin. We can totally chaos monkey
00:55:38
the the economy and just see what breaks. I think that the you know you you you sort of phrase the we could, you
00:55:46
know, do the research paper and we could do, you know, Aspen Institute as a bad thing, but also it can be a bad thing if
00:55:53
you're the small business owner right now who has 30 employees and you just literally don't know what you're going
00:55:57
to do next month. And so, so that that's that's sort of then the argument to not
00:56:02
counterbalance. That's like why you do have some bureaucracy and and you don't chaos monkey the economy and why Rand
00:56:07
Paul is literally saying we shouldn't actually let you know have unilateral you know control over tariffs. So you
00:56:13
know interesting that that like dynamic there. All right, you want to uh wrap us
00:56:19
up here or you want to pass? Oh, am I still on the pod? Yeah. Well, you turned your camera off. So, look, I spent 80
00:56:28
minutes debating this topic with Larry Summers three weeks ago. The point I made then is that we had in
00:56:36
this city at for 25 years a globalist consensus on trade that distorted a lot of outcomes. And I don't need to rehash
00:56:44
that debate, but I'll just recall that Larry Summer's main argument for why this would not work out is that the
00:56:52
market was down. Do you remember that? That was his evidence. Yeah. That this wasn't going to work. Okay? And it was
00:56:58
all about the market not pricing in lower expectations. Well, guess what? The market is actually up since
00:57:04
Liberation Day on April 2nd. So, what happened 3 weeks ago was basically a panic in the market over this policy and
00:57:13
the media has been trying to fuel that panic. Now, what I said as well is we do have to stick the landing on this. I
00:57:20
mean, President Trump shifted the conversation away from this globalist consensus and he's now redefined the
00:57:27
debate, but it is now up to Scott Bessant, the Treasury Secretary, Howard Lutnik, the commerce secretary, Jameson
00:57:33
Greer, the US trade rep, and so on, the Trump trade team, to now negotiate these
00:57:38
deals, stick the landing. And I agree with you to the extent that the sooner that is done, the better because it is
00:57:44
good to provide business certainty. But the idea that so far this hasn't worked.
00:57:50
I think again the main argument against that was the market reaction that now the market's not positive. So I think my
00:57:56
point is just we need to give this time to work. I think it's too soon to be judging this policy as if it hasn't
00:58:02
worked yet. It needs to be executed properly. And quite frankly, Ryan, I mean, I remember the last time you were
00:58:07
on this pod, you were coming on about, wasn't there like some union deal that was supposed to shut down all the ports
00:58:14
and all the shelves would be empty? That never happened either. It did happen. It
00:58:18
did. They shut down for 3 days. I don't Okay. I don't remember the the shelves being empty, which is now the new panic
00:58:24
the media is trying to create. So, look, there's a lot of pants wedding that's occurring here that's being fueled by
00:58:29
the media. Well, well, I I do want I want I do want to I just want to bookmark one one thing. The only thing I
00:58:33
actually um I was more frustrated listening to the Larry Summers and and you conversation because I was like, why
00:58:38
Larry make this point like come on. Like, what? Don't go down the WTO rat hole. Like, that's that's not relevant.
00:58:43
So, here here's the other thing. Of course, it's relevant. It's how we got here. No, no. Like like as in like
00:58:49
that's 25 years ago. Like let's worry about literally today and like what what do we do going forward today? And the
00:58:55
only thing I just want to say because I because I I do think that that you know I appreciate your point about hey
00:59:01
there's like you know everybody's freaking out whatever but to be totally fair that some of that freak out whether
00:59:07
we can decide how emotional it needs to be is the reason that then Trump walks back the things that then cause the
00:59:12
market to correct. So, so we can't just say the market's back and and like see we didn't need to freak out cuz it was
00:59:18
literally I said we have to make the deals. We have to stick to the landing. But look, China over the last 25 years
00:59:23
has been able to strategically annihilate our rare earth processing capability and our ability to cast rare
00:59:30
earth magnets. We just sat back and watched as the market basically went to the lowest bidder which was being
00:59:36
subsidized by the Chinese government which the WTO allowed them to do. And now we have a critical dependency. Yep.
00:59:42
In our supply chain on China for basically every electric motor in every product, including cars. That was crazy.
00:59:49
We should not have allowed that to happen. How are you going to change that? So, we needed to shift the
00:59:54
political conversation to recognize the ways in which free trade led to unfair trade and created unacceptable
01:00:02
dependencies on the for the American economy. Wait, wait, just I just want to make one one point. It's more than that.
01:00:09
point and then I'll but this is the national security of the United States that that's at stake. Let's go take your
01:00:16
favorite pet issue. China invades Taiwan. Okay. And we have to take a side. Jason, my pet is hold on. Let me
01:00:24
just finish. And the and the and the Chinese say here are the implications of supporting Taiwan on this A, B, C, and
01:00:33
D. You don't get any pharma APIs. You don't get any rare earths. You don't get any batteries.
01:00:38
Okay, it'll it'll send life back 50 years. Or let's say China and India get into a fight and we're forced to pick a
01:00:46
side. Same situation. The point is there's all these scenarios that we never even
01:00:52
considered us being able to have strategic optionality to make the decision that's morally and ethically
01:00:58
right for the United States. And I think that we have learned through this lens that these are huge issues. The thing
01:01:05
that the Chinese did that was so brilliant, which we still don't have an answer for is they have these national
01:01:10
champions. And being a national champion allows you, and we'll talk about this in
01:01:14
AI, it allows you to blur the lines between the public and private partnership. It allows you to blur the
01:01:20
law. It allows you to blur capital. And I'm not saying we have to do that, but what I am saying is we need to have our
01:01:27
own answer to it. And that was never on the table until April 9th. All right. So yeah, but but like 100%
01:01:36
like do that strategy and then and then and then don't have a mad rush. What is the strategy? No, no, no. Because
01:01:41
because that's a you if you have a, you know, Ryan, what what is the number? I don't know, trillion of imports or
01:01:45
whatever, like you don't need everybody then than then jamming the system to build their supply chain, you know, in
01:01:51
the US to solve that problem immediately. If we're sitting here in 9 months and you're saying this and there
01:01:56
are no deals, I would say that you're right. what Howard Lutnik said last week and again we may have all gotten caught
01:02:03
up in the knuckle tattoos and we missed this but he was very clear we have a country a deal is already done we're
01:02:09
convening parliament it's going to be the first of many so for all we know there's like 30 deals that are waiting
01:02:16
in the wings and the first one will set the tone and and I think that Sax is right here which is it's way too early
01:02:23
to declare defeat and that it was quote unquote chaos I think if we're sitting here in 9 months and foreign direct
01:02:29
investment has shriveled up and domestic investment has shriveled up because there is just no continuity. You have a
01:02:36
claim. But that's No, no, because I I I don't I don't think that'll happen. I don't I don't think that'll happen. I
01:02:41
think we will end up in like I'm I'm with Ryan like we will end up in a good spot because we'll iterate through this.
01:02:45
My my only point is there's an alternative path that that could have occurred. It could have been done in a
01:02:50
more thoughtful well-communicated pattern instead of hey let's do barrel rolls with the airplane. I don't
01:02:55
disagree with you, Aaron, and I can tell you we've already started to see layoffs
01:02:58
and nobody wanted to even initiate the barrel roll, guys. Yeah, listen, we get it. It's like, hey, I don't want
01:03:05
anything to change. I think we agree to disagree on this. We got to move on to the next one. Hold on. This one last
01:03:11
point. Excuse me. Excuse me. You didn't call me for 40 minutes. I just want to make one final point. Eron, here he
01:03:16
goes. Erin, where were you with this perfect plan? Yeah. Where were you with this perfect plan before Liberation Day?
01:03:23
I was telling Kla about it. You were telling Kamla. Okay, great. They were having nobody nobody ties and they were
01:03:31
talking about this specific issue. All the people who suddenly know what the perfect plan is and how to perfectly
01:03:37
execute it. No barrel rolls had nothing to say about this topic for 25 years. Now all of a sudden they've come forward
01:03:43
with their perfect plans. I would say that's victory for Trump. Finish. It's like look at this. The best thing of all
01:03:49
of this is you've got the Liberals embracing Milton Friedman and their backgrounds on there. I love it. Yes. Uh
01:03:54
All right. Listen, we're going to agree to disagree. We're going to agree to disagree on this one. You know, the
01:03:58
Liberals love the stock market. Listen, Sachs Kla is coming on next week. We're going to make some cocktails. It's going
01:04:03
to be wonderful. You we'll ask her some direct questions about it. But I want to
01:04:08
talk about AI agents. 2025 shaping up to be the year of AI agents. Tons to talk about here. Open AI is planning to
01:04:16
charge between two and 20K a month for different levels of AI agencies would be basically cron jobs they would run in
01:04:22
the background and do things for your company that uh humans are doing right now. You may have heard of this uh
01:04:28
agentic tool. Again agentic is just a fancy word for agent which is a fancy ro word for like a cron job that just runs
01:04:35
uh perpetually. Yep. And uh Manis is uh the company in China that started this weirdly benchmark invested in it that's
01:04:43
created a whole bluff on the side and Manis' website has a really good visualization of what these agents would
01:04:49
look like. So first of all I think you're giving a little too much credit to Manis. They didn't come up with the
01:04:53
agents but I do think that they have a very good demo and it's hard to know exactly how real it is because not
01:04:59
everyone's used it and it's from China. It's from China. I'll get to that in a second. If you go to their website, you
01:05:05
can see a bunch of their demos. And I do think that what they deserve credit for
01:05:09
is advancing the ball on the UI paradigm. And it's not that other people weren't doing this. I mean, I think
01:05:17
notably Anthropic was doing this with its operator product, but the basic idea is that you've got this two-pane view
01:05:23
and in one window, you've got the standard chatbot interface and then in the other view, you can see what the
01:05:29
agent is doing. And that agent has the ability to toggle between it currently four apps. There's search, browser,
01:05:37
code, terminal, and document editor. And so when you give Manis a task, the first
01:05:42
thing it does is create a to-do list in the document editor. You can kind of see
01:05:46
it there. And then it works sequentially to achieve each of those tasks and then
01:05:49
puts an X on them there. And you can kind of see it working. And I think what's cool about the demo is just the
01:05:55
way that it seamlessly toggles between those four apps. and you can see what the AI agent is doing, you know, and
01:06:01
it's browsing the internet, it's searching for things, it's writing documents, it's crossing things off its
01:06:06
to-do list. Now, I think it's pretty easy to imagine where this goes, which is you'll be able to connect an agent to
01:06:13
all of your SAS apps. So, it won't just be four applications. It'll now be connected to dozens of applications,
01:06:19
including ones that already have your data. And it's going to know what actions it's possible to take in those
01:06:24
apps. So when it creates its to-do list, there's a much wider range of things that it can accomplish. And in fact,
01:06:30
there's a new standard called MCP which is taking off like wildfire which is built specifically to enable agents to
01:06:37
connect with applications and understand the data and understand the actions that
01:06:40
are possible in those SAS applications. So look, Manis is just at the tip of the
01:06:45
iceberg here. I think this will become a very standard UI paradigm. That's the reason why I mention it. Not because I
01:06:50
am predeclaring them to be the winner in the space, but just because I think there's a lot of talk about agents and I
01:06:56
think it's hard to conceptualize what that means without just seeing it visually. A great great summary there,
01:07:02
Saxs. And Aaron, I want to get your thoughts on it because obviously you're running Box and and you have your your
01:07:08
finger on the pulse of this. We actually started building one of these in our venture firm. We have 20,000
01:07:14
applications a year and we have updates coming in from investments. We are now taking those sacks Aaron and we are
01:07:20
having an agent sort them and then look for competitors and compare them to the last update and we're looking into our
01:07:27
notion our kod and saying what else have what other communications have we had what questions should we ask about the
01:07:33
startup and about their strategy and then we're presenting that in Slack to our team. So this is coming fast and
01:07:39
furious and we spend I don't know probably 15 minutes on each of those incoming applications. You start doing
01:07:45
the math on that. Talk about 5,000 hours of work. Aaron, what are you seeing on the street? What are you doing at Box in
01:07:51
terms of agents landing right now in Q2 of 2025? Uh, yeah. I mean, I think I think Sax represented it well, which is
01:08:00
which is, you know, you have to now think about AI as as effectively being able to do anything on a on a computer
01:08:06
or another piece of software as as a human can do. And the little distraction that that I think happened two years ago
01:08:13
after the chatbt moment was we sort of thought about that as oh we're just going to now you know do like typing
01:08:18
information retrieval and that's a new paradigm for user interfaces let's say so you just like talk to your software
01:08:24
and you like search Zillow via chat that was sort of a little bit of a distraction that that's super helpful
01:08:29
like when you want basic information lookup or whatnot the big breakthrough was starting to think through these
01:08:34
things as as full you know effectively uh uh you know agentic systems that that operate on any amount of data, any
01:08:42
amount of tools for as long as you want to complete any task that you want. And this is sort of the big year where
01:08:48
agents are starting to, you know, enter the vocabulary of enterprises, of IT people, of, you know, larger and and
01:08:55
certainly small organizations. Um, and and it kind of requires you to have a little bit of a of a reset moment on how
01:09:01
you think about AI, which is which is it's not just now a kind of a co-pilot that you talk back and forth with. it's
01:09:07
actually something running behind the scenes that's now actually starting to deliver, you know, real automated, you
01:09:14
know, kind of work for you. And so lot lots of implications like, you know, massive implications to what the
01:09:19
software business model is in the future. You know, I I I would argue, you know, strongly that's a massive TAM
01:09:23
increase um because now software starts to go after labor spend. It completely changes the dynamics of then, you know,
01:09:29
how do you build a moat in a world of AI agents? Um uh but but I think unpack that piece there Erin. You said
01:09:35
something very interesting how you how software then is going to go over human spend. Yes. Explain that concept. Unpack
01:09:43
it for a second. David and I, you know, we we we go back way back in SAS land, but like you used to basically just, you
01:09:50
know, you built you built a piece of of software and you sell it for the number of of people in the organization. And
01:09:56
so, you know, company has 500 employees and uh and you sell that thing for, let's say, $10, you know, a user a
01:10:03
month, you know, 120 bucks a year and you make 60,000 bucks. Um, and so so that that's kind of the business model.
01:10:09
Uh, now when your software actually brings the underlying workflow to the customer or the underlying outcome to
01:10:16
the customer, so you know that that company might have 10 lawyers and so previously if you were selling software
01:10:21
for lawyers, you had a maximum amount of 10 seats that you could sell. Now all of
01:10:25
a sudden if your AI agents are doing the equivalent of let's say parallegal work
01:10:29
or some form of professional services all of a sudden you might be able to sell a multiple of the initial kind of
01:10:34
10 seats that you would have sold previously. So you see it as a huge opportunity because now you're not
01:10:39
enabling a human to be 5% more productive. You're replacing a human or you're replacing one out of 10. Yeah.
01:10:44
And and actually I'm going to take a massive I'm going to do an underscore on this point though. I I don't I don't
01:10:48
like the word replace because I I think actually most of the upside is actually going to be for companies that now
01:10:53
deploy labor at things that they wouldn't have deployed labor at before. And and you know, maybe I'm biased from
01:10:58
the view we have, but most of our conversations with customers are when they have AI agents, it they can
01:11:04
actually now go and actually deliver work in areas that would have been unaffordable previously. So they
01:11:09
actually they weren't doing the work. True in logistics. So, like we we're making thousands of phone calls a day
01:11:15
using AI, calling truck drivers, and we if we have a load, we've got 400,000 truck drivers using the mobile app, the
01:11:22
Flexport mobile app. I don't have enough loads to keep them all checking it every
01:11:26
day to see if there's a load that matches them. And if they don't check it, I they're they're useless to me now.
01:11:32
And it was too expensive to call the truck driver and have a human call and talk to them, even if it's a human in a
01:11:36
call center in the Philippines. Whereas with AI, it's almost free. I'm calling thousands of them a day going, "Hey,
01:11:42
this load looks like it's a good match for you. Are you interested?" And and then we activate them on the platform.
01:11:47
Um, that's new work that wasn't going to happen before, not just a replacement. Yeah, I I think that I think probably I
01:11:53
think like we we have, you know, in the valley, unfortunately, we've been co-opted a little bit somewhat with with
01:11:58
a little bit of a doomer, you know, mindset in some areas and and we think of then AI is, okay, like like it's all
01:12:04
fixed pie, it's going to replace things. And on the ground with large enterprises, the vast majority of the
01:12:10
use cases are are it's it's the you know, it's the ability to finally review the contracts that we never got around
01:12:16
to reviewing. It's the ability to finally automate an invoice process that we never did. It's the ability to go in
01:12:21
and just create marketing campaigns in every language that we never got around to. And so so I think that'll probably
01:12:27
be actually like 90% of the usage of AI in the future will be things that if we look back and we snap the line right now
01:12:32
and we said this is what knowledge work is today. 90% of AI usage will be things
01:12:37
that we don't do today. 10% will will replace you know what we're what we're doing in some areas. I think that's the
01:12:42
right take cuz Chimath I can tell you in our firm we would never have associates
01:12:46
or researchers or analysts sax you also were in this line of work as well venture capital you would never have
01:12:52
them review legal documents. That's something lawyers would do in the legal department. But now because of AI, we
01:12:58
have them say, "Here's the safe. Here's the term sheet. Here's the edited version, dump it all in, find out what
01:13:04
the changes are, what are the deltas here, and and then let's have a discussion about what the founder
01:13:08
changed in a Sander document, and we don't have to bother with an attorney, and maybe you wouldn't have even checked
01:13:14
those documents if you were, you know, a seed fund or an angel fund. You would just go along for the ride because
01:13:19
you're the 10th person signing the documents." So what what do you think Chimoth here in terms of the premise
01:13:24
that maybe it's 10% replacing work that's happening but this is blue ocean and we're going to do 90% of like new
01:13:30
stuff that we just never got to. Yeah, I tend to I tend to believe that's true. I
01:13:34
think the customers that we sell into at 8090 are largely large enterprises as well. So not dissimilar to Aeron's
01:13:42
customer base. What I would say is that what they are encountering is the trough
01:13:49
of disillusionment. And I don't know if Erin, you're seeing this as well, but every single, you
01:13:56
know, CIO ran around signing up some sort of AI product in large part because their CEO
01:14:04
would say to them, hey, what's your AI strategy? And the reason the CEO asked them that is that at some point somebody
01:14:10
on the board said, what are we doing about AI? So that's the the cascade that that that we went through
01:14:17
in the last two years. And I think what has happened now is people have spent billions and billions of dollars. I
01:14:24
think you can see it in the revenue traction of the AI companies. But I think where we are
01:14:30
today is that there are some real technical complexities that have not been solved. I'll give you an example.
01:14:37
We have a lot of customers in regulated industries which is to say that if you make a
01:14:43
mistake you will get fined or you will get shut down. Life sciences, healthcare, financial services are three
01:14:52
examples. People still don't seem to appreciate that when you replace software that is deterministic with
01:14:59
software that is probabilistic, meaning software that somebody wrote for you, do A then do B, then do
01:15:08
C with an LLM that can hallucinate, you'll have errors. So what used to be a throwaway
01:15:17
thing, which is quality assurance and QA, right? unit testing, integration testing is now the only thing that
01:15:22
matters. Why? Because if you're a financial services institution and you're supposed to do KYC and hit BORS
01:15:28
and now all of a sudden you send a wire somewhere in Syria, guess what? You're in trouble. Bueno. Yeah. If you're a
01:15:34
healthcare company and you're supposed to do some clinical diagnosis to send out a drug on time and you don't do that
01:15:41
because the the model hallucinates, that's a real problem. And I am guaranteeing you, we have not seen
01:15:49
the class action lawsuits that will come when those errors will eventually be made. They're guaranteed to be made. We
01:15:57
just don't know the scope and the scale of them. So that's why I'm sort of of this posture where I think we've sold in
01:16:06
a ton of promise. I think the reality is much more tactical. It's a little bit more benal. I think we're sorting
01:16:13
through the exact use cases where you can put guard rails around these error rates where it's okay and tolerable.
01:16:19
Like Ryan will probably tell you there's some number of phone calls that just sound totally fcocked but he's okay with
01:16:27
that because the broader thing is okay and Aaron will so I don't know. So I don't want to talk to my customers
01:16:33
though. I have it calling truck drivers to offer them you know offer them loads but I'm not having to talk to my
01:16:38
customer. Sorry, I I meant your truck drivers, but my my my point just is that I think agents are
01:16:45
real, but I think that we are far away from that because we're still at the phase of how do you build reliable
01:16:52
software in production for an enterprise versus the toy apps that you see on the
01:16:58
internet which is like let me vibe code something. I think these things are worlds apart still. Okay, so let me get
01:17:03
saxed in on here and just to inform the audience you heard tri of disillusionment. This comes from the
01:17:08
hype cycle. This is something Gartner has been talked about for a long time. So in case you're taking it for granted
01:17:13
if you're watching, you have some sort of technology trigger like agents. You have this like peak of inflated
01:17:18
expectations. Now we're in the trial of disillusionment. Hey, this stuff doesn't
01:17:21
work. It's hallucinating. But we're kind of going up that works. It just doesn't
01:17:26
say we're on the slope of I don't see the disillusionment. I don't know where this is coming from. I don't even think
01:17:30
we're at the peak yet. Oh, okay. So you think we're still going up? cuz I I a lot of people to Shimat's point were
01:17:37
buying stuff and saying, "Hey, it doesn't work, you know, and now we're in the mess." Let me say let me say it
01:17:42
differently, Sax. I think we have not yet figured out how to move the budgets from experimentation to mainline
01:17:49
production. Meaning where large chunks of the US economy are comfortable enough with the ways in which hallucinations
01:17:57
are managed such that they will replace legacy deterministic code with this new probabilistic model generated code
01:18:06
meaning model enabled code. Let's just put it that way. Where are we on the slope here? Yeah.
01:18:12
Look, I would I would separate change management issues, which are always going to be important and there's always
01:18:18
going to be big ones whenever there's a big disruption, especially in enterprise
01:18:21
and especially around compliance and legal and all that kind of stuff. I would separate that from the impact of
01:18:25
the underlying technology trend. And I don't think the impact has come anywhere close to peaking yet. And in fact, I
01:18:33
would say the rate of progress is exponential right now on at least three key dimensions. So number one is the
01:18:40
algorithms themselves. The models are improving at a rate of I don't know three to four times a year. They're not
01:18:45
just getting faster and and better, but qualitatively they're different. Remember, we started with pure LLM chat
01:18:52
bots. Then we went to reasoning models. And the difference there is with a chatbot, I just it's like kind of a
01:18:58
smart PhD or college student giving you an answer off the top of their heads. The reasoning models, it's more like the
01:19:04
PhD saying, "Okay, let me go off and think about that. Let me do a project on that." And it could work for 30 seconds
01:19:10
or a couple of minutes. I mean, as much compute as you want to throw at it and it will break down your complicated
01:19:15
question into a bunch of sub questions and then it'll try different approaches and it can validate some of those
01:19:19
approaches and come back to you with a much more impressive answer. And if you've been using like the Gro 3 deep
01:19:25
research or the new Chad GBT3 to do these types of new reasoning models, it's pretty mind-blowing what
01:19:34
they're capable of. Have we even come close to figuring out how to tap the potential there, especially in an
01:19:39
enterprise context? No, but my point is that the rate of progress on the algorithms is again three or four
01:19:47
times here. Okay, go finish about sex and then I'll I'll take it and pass it. Go ahead.
01:19:53
Well, I was trying to lay out the dimensions of which progress is proceeding exponentially. Okay, so one
01:19:58
is the algorithms. Okay, which is not just quantitative, it's also qualitative. We didn't even get to the
01:20:03
agents part of it yet, but that's the next big leap after reasoning models. We're just starting to scratch the
01:20:08
surface there. Then you've got the chips. I mean, the chips are getting better at, I don't know, three to 4x a
01:20:14
year. We've gone from, you know, the H100 to the H200. Now we're on the GB200. We'll be a GB300 soon. We'll be
01:20:22
on to three times better per year or they get better three times per year. No, no, no. They're getting the chips
01:20:27
themselves, depending on how you measure it. Each generation of chips is probably
01:20:31
three or four times better than the last. Okay. and Nvidia is back to rolling out new chip, new generation of
01:20:38
products roughly annually and I'm just using them as one example. Obviously there are other companies as well. So
01:20:44
basically the lead from Hopper to Blackwell to got it Reuben I guess will be in next year and and then I think
01:20:50
Fman's coming after that. I mean really an astounding rate of progress. It's not
01:20:54
just the individual chips are getting better. They're figuring out how to network them together like with NVL72.
01:20:58
It's like a rack system to create much better performance at the data center level. And that would be like the the
01:21:04
third area where you're seeing basically exponential progress. Just look at the number of GPUs are being deployed in
01:21:11
data centers. So when Elon first started training Grock, I think they had maybe 100,000 GPUs. Colossus was 100,000.
01:21:17
Correct. Right now they're up to 300,000. They're on the way to a million. Same thing with OpenAI's data
01:21:23
center, Stargate. And within a couple years they'll be at I don't know 5 million GPUs, 10 million GPUs. So and
01:21:29
you see that on the power side, right? You're going from 100 megawatt data centers to 300 megawatts to we're just
01:21:35
starting to now see the first gigawatt power data centers. I don't even think they're live yet, but this is where
01:21:40
they're trying to get to. And I don't think it's beyond the real possibility that we could be at 5 or 10 gawatt data
01:21:46
centers in the next I don't know several years. So, so my point is just look, the
01:21:50
algorithms, the chips, and the data centers are all improving or scaling at a rate of, I don't know, 3 to 4x a year.
01:21:58
That's 10x every 2 years. Okay? Where people don't understand exponential progress is that if you're getting
01:22:04
better at 10x every 2 years, that doesn't mean you'll be at 20x in four years. It means you'll be at 100x. 100x.
01:22:11
So the models, the chips, and the data centers will all be 100 times more powerful in four years, let's say at the
01:22:16
end of of this presidential term. So you multiply those things together, the algorithms, the chips, and then the raw
01:22:23
compute that's available, you're talking about a millionx increase, some of which
01:22:28
will be captured in price reductions, some of it will be in the performance ceiling, and then some of it will just
01:22:33
be in the overall amount of of AI compute that's available to the economy. But the impact of this thing is going to
01:22:42
be absolutely massive and I think people still don't even appreciate that fact because they don't understand
01:22:45
exponential progress. Yeah. And I think maybe just to square the circle the the because because everything is that that
01:22:52
you just said tax is what I think is propelling the industry and then the reality on Jama's side like like just
01:22:57
just to connect the dots. So uh we have an eval test that we do uh where we run enterprise data through every model to
01:23:05
to kind of figure out its accuracy rate and and you know how much it's not even hallucination but just literally how
01:23:10
much data does it miss when we ask for facts. The best model in the world um actually interestingly we was gro three
01:23:16
on on this particular test. We send it 500 documents and we ask for 40 data fields back from the documents and so it
01:23:23
has to get every single data field correct and we only do a single pass. So we send the document to to the to the
01:23:29
model, we get a single pass back. Right now the the best score is about 90%. Um and so you can imagine a number of
01:23:35
industries where you can't have 90% accuracy, you know, if you give something, you know, a question on 40
01:23:41
data fields. Now there's ways to solve it is you rerun it multiple times or you chunk up the document into smaller parts
01:23:47
and so it doesn't get confused by the large context window. But a lot of the people that were deploying AI a year ago
01:23:53
or a year and a half ago weren't doing that. And so they they you know they did have a a kind of a a pilot run of
01:23:59
something and it it kind of worked okay. And what they have to realize back to your point sax is like this space is
01:24:05
literally exponentially you know changing and so if you don't use the the latest methods of okay you have to
01:24:10
actually like run the data through the model multiple times um and you have to chunk up the data into smaller parts and
01:24:16
you have to use a reasoning model and you have to make sure that your your prompt is like hyper tuned for the
01:24:20
particular use case. If you haven't done those four things, then you probably will actually end up with a project that
01:24:25
fails. And and even so, even when you do all those things for even, you know, harder problems, you know, you're still
01:24:30
going to run into issues. So, I think I think the challenge is that everybody's running a million miles an hour right
01:24:34
now and they're trying a lot of things. Some work, some don't work at the same time that the space is actually, you
01:24:40
know, you know, changing at a at a pretty uh, you know, kind of crazy rate. and let's take a look at our partner
01:24:45
Poly Market and uh which company they think will have the best AI model by the end of 2025 and get feedback from our
01:24:51
panel on if you think this is accurate and who you would pick here. Looks like Google is in the lead here. 41% of
01:25:01
people believe that they will have the best AI model by the end of the question. What is what is the dimension
01:25:08
like you know we use Gemini so for many tasks at 8090 we use Gemini it's incredible but for most of our codegen
01:25:15
we use anthropic and claude kicks ass it's it's exceptional this is uh based on the best scores in the chatbot arena
01:25:23
which just became a fourth company so that is slightly different because people have
01:25:28
gamed tests so that is a rub there people are now building their a model for the AVAL unit right all the models
01:25:34
are way overfitted for these eval so but if you had to pick who's your I mean so
01:25:38
I guess Chimath you're saying you have to take a task by task it's what depends on task I agree what Zach said is right
01:25:43
so it's kind of like what what problem are you trying to solve and then you have to ride this technology wave that
01:25:48
is compounding very quickly all I was just trying to get across is that the error rates have been diminishing but
01:25:54
not nearly as fast as you need for some sectors of the economy so you can use a model to generate deterministic code
01:26:00
that's great and as long as you unit test it and integration test it'll be fine but I'm saying if you're going to
01:26:05
use a model in production in an environment where if there are consequences we're not there
01:26:15
yet but you could use it for writing or writing jokes or maybe but that's that's too binary like
01:26:23
it's already used right now in healthcare but it's just the doctor's meeting notes that that would normally
01:26:28
take 30 minutes to go and transcribe yeah so so it's we you can't be too too black and white on that one yeah what's
01:26:33
happening right now the reason why the the progress is so rapid in coding assistance and I I think you know you're
01:26:39
right that enthropic with was it claw 3.7 37 yeah yeah I think they're the leader and in fact I think the manis
01:26:47
demo that we showed it's not entirely a rapper on clawed because they actually they do a number of different things but
01:26:52
I think they are significantly using anthropic for the code assistant part of it in any event the reason why the
01:26:59
progress is so rapid with coding is because code compiles and you can determine objectively whether it works
01:27:06
or not, you can validate it. And so that makes it a perfect area for AI to get better at through reinforcement learning
01:27:14
and test time compute is AI tries a bunch of things. It sees what works. It sees what compiles, sees what the user
01:27:20
then accepts, and then be able to learn and iterate based on that. That's why coding right now is really the big
01:27:26
breakthrough application and use case. But it's not going to be the only one. I mean, math is another good area where I
01:27:31
think AI is improving rapidly again because math you have proofs and you can look at the results and see if it
01:27:39
validates. Now, I think one of the big questions in terms of AI progress is how extensible is the progress to other
01:27:46
areas that don't easily validate that way. So, for example, legal work is I think a really good area for AI, but how
01:27:54
do you validate that it's correct? You would have to go to a court, right? the court is the compiler like a lawsuit is
01:27:59
the compiler or maybe the laws or you could hire like a thousand lawyers or experts in an area to basically do you
01:28:07
know reinforcement people are doing people people are doing but it's not like a compiler to your point it's not
01:28:12
like a it's not the progress isn't going to be as rapid because it's harder to validate but absolutely but my guess is
01:28:17
that once they figure out how to nail coding math and the things that are easily validated they can move to the
01:28:23
things that are harder to validate and but I I think this is one of the big questions is whether I think people just
01:28:30
kind of assume that AI progress will be you know equally fast in all areas and I
01:28:34
think it's possible that AI gets really good in some areas better than human but
01:28:38
it's sort of childlike in other areas and um narrow possible outcome is make your point right like with a finite
01:28:45
answer or an answer we know is the definitive well this is but but this is the the important thing about the agent
01:28:52
kind of you know let's just say uh framework or architecture uh you momentum was was instead of just saying
01:28:59
okay we're going to do a single pass through the model and then whatever it comes back with is is we're going to be
01:29:03
satisfied um like you know the legal work might be might be reviewed by another agent whose job is to review
01:29:10
legal work and so we we can just throw more and more compute at the problem uh and we're just early in figuring out how
01:29:16
to architect those or multiple models right you could have you have enthropic checkp check
01:29:23
Gemini yeah when you have some anomaly it spits back out to the user. So human in the loop still matters in this type
01:29:28
of process. In the early days of OCR, you would have a computer say here's the characters in this legal document. Then
01:29:34
you'd have two humans type it in and then you would get a certain level of certainty. You'll quickly find that when
01:29:39
you layer these models on top of each other, the test time compute costs are astronomical. Y and Aaron's probably
01:29:46
dealt with this like it's like I get a bill from AWS and it's like oh wait, hold on a second. I just, you know, per
01:29:54
100,000 this month. what's going on. So we have to get to the bottom. That that by the way is another major trend line
01:30:00
which is that the new applications that we talked about are all much more token intensive. So we went from basic LLMs
01:30:06
totally you know which don't require that many tokens to give you an answer to the reasoning model where you can
01:30:11
spend a thousand times more tokens just getting one answer to a question and now
01:30:15
the agents are going to be even more token intensive than that. So the amount of compute required to serve all these
01:30:21
new applications is going to be massive which is why I think the capex buildout actually makes sense when you do a deep
01:30:27
research to your point David you're firing off maybe 200 queries and it's asking them the AI is saying hey what
01:30:33
query should I ask on behalf of the user and then you go down that rabbit hole you it's basically like doing 200 of
01:30:38
them at once Ryan uh your thoughts here on AI first companies and agentic computing well the one I really wanted
01:30:44
to tie back to was actually our earlier conversation on tariffs and there's a very real use case of of LLMs is how do
01:30:50
you classify a product and you'd like to get to what we see today when we did our
01:30:55
first machine learning based natural language classification of a product you take a product URL listing page a
01:31:01
Shopify page or Amazon page and say hey what what classification code is this what duty is owed six years ago in a
01:31:08
hackathon we got to like 70% accuracy we're now in high 90s accuracy versus what a human trained expert will get to
01:31:16
but you actually get to which is not good enough. You know, you're wrong 3% of the time. You know, you might have
01:31:22
committed a violation of the law for sure. But actually, what is truth in that regard? It's there's a lot of gray
01:31:27
area in this. And truth ultimately is what does customs say? What does the CBP determine is correct? And those guys are
01:31:35
using software, right? That's pretty that's a very simple algorithm and it's a decision tree that's going, okay, is
01:31:41
it a shoe? Yes. Is the top made of leather? Yes. You know, is the bottom made of rubber? and they just go through
01:31:47
a very simple and that outputs it. And so on some level, if you convince the government to use your LLM, it becomes
01:31:53
true whether it's true or not. I think there's going to be some interesting cases like that that we haven't really
01:31:57
thought through of like when does the government adopt these to be the source of truth. Okay. All of this speaks to
01:32:03
this thing that's going to sound totally esoteric, but like we all used to on QA,
01:32:10
right? Like the least talented engineers were allocated to QA. I think in the world of AI it's it'll end up being the
01:32:17
most talented. You know we internally at 8090 we call it improvement engineering
01:32:22
and it's a total specialty. It's similar to when I kind of coined the growth team
01:32:27
at Facebook. I feel it's the same kind of moment where improvement engineering is really the skill that translates toy
01:32:35
apps and vibe coding into something that's very practical and real. And we like and my team and the leader of this
01:32:42
team, he's like steeped in things like Japanese kata management from like Toyota and quality systems and these are
01:32:48
all the things that matter when you're trying to just shrink the error rate down to zero so that you can use it in a
01:32:54
reliable way and also to document it so that if people want to question what happened or have you know recompense or
01:33:03
some some way to come back and say hey that that really harmed me, how do you even do that like these are all very
01:33:10
complicated issues that that will get sorted up. Super I think interesting. Okay, four. I got to wrap guys. I got to
01:33:17
catch a flight to Miami. Let me do a closing here. If you want to keep going, you're welcome to. Three, two, the plane
01:33:21
just waits. Just text the pilot and just tell them you're all right. Listen, I'm
01:33:25
not burning all the allin credits, so to speak, and all of our tokens. I'm kidding. I'm kidding. I'm kidding.
01:33:34
private to everything and then putting it on the allin budget and the rest of us are flying southwest
01:33:39
for your dictator Jim Paul. I miss a flight. It's a strange concept. Yeah, David s.
01:33:46
What does that mean? David, when's the last time you flew commercial? Clinton, I haven't missed a flight in about 15
01:33:51
years for Ryan Peterson from Flexport. Aaron Lee from the amazing box. Chim pitia.
01:33:59
David Saxs your chairman dictator Zar. I am the world's greatest moderator. Love
01:34:04
you, boys. We'll let your winners ride. Rainman David S. We open sourced it to the fans and
01:34:16
they've just gone crazy with it. Queen of [Music] besties [Music] are my dog taking notice your driveways.
01:34:34
Oh man, my habitasher will meet up. We should all just get a room and just have one big huge orgy cuz they're all just
01:34:40
useless. It's like this like sexual tension that we just need to release somehow.
01:34:45
Wet your feet. Wet your feet. Your feet. That's going to be good. We need to get
01:34:51
merch. I'm going all [Music] in. I'm going all in.